Market Thoughts

As of today's close, (From the Yahoo Finance Site):

Dow = 13,551.69

S & P = 1,497.66

NASDAQ = 2,724.41

From my calculations:

Dow 50 DMA = 13,411.37

Dow 200 DMA = 13,338.84

S and P 50 DMA = 1,484.52

S and P 200 DMA = 1,489.37

NASDAQ 50 DMA = 2,692.07

NASDAQ 200 DMA = 2,608.05

All of the indexes have retaken their moving averages but will they hold onto these levels? If you look at the indexes over the past 6 months, the 50 DMA has been a level that has been repeatedly crossed but the 200 DMA has been one that has held firm. The repeated crossing of the '50' reveals the skittishness of market participants. It also shows that market participants have much less conviction in their trades and are ready to swing the other way if conditions warrant. The 50 DMA on the S and P stand out as it is below the 200 DMA and is a sign of weakness. This makes sense since the financials have been weak and the S and P has large exposure to the financials. The 200 DMA lines on each of the 3 indexes have acted as support and therefor a breach in these moving averages will have higher significance. Although the 200 DMA does tend to be a lagging indicator, it should be closely observed.

How is the economy doing? The macro picture of the economy seems cloudier. For example on Christmas Eve I went shopping on 5th Ave in midtown Manhattan. It was in the early afternoon and the weather was perfect! While in one store I noticed that it was fairly empty, so I asked the floor manager how business was. His response went something like this "Business has been spotty at best, definitely worse than last year... I am not sure where these economic reports are coming from - the ones that state that all is well in the economy, because that is not what we are seeing here." Now I do not want to get this nice floor manager in trouble so I will not mention the name of the store. But if a hi - end retailer's business is spotty, what is the condition of the rest of retail?

The weakening housing market may be taking its toll on the consumer especially as credit conditions tighten on everything from credit cards to HELOCS. What are the HELOCS you ask? Well they are not like the Warlocks - those nasty characters at the end of H G Wells' classic "The Time Machine" - but rather they are lines of credit that a home owner could tap into when needed. The HELOCS were a sign of the easy money that flooded our economy, but the tap has now gone to a trickle and that makes me wonder about the state of the US consumer. The US consumer is about 70% or about $9 trillion of the US's $13 trillion behemoth GDP. Figure out the consumer, you figure out the economy and equities too.